credit ratings

Thai central bankers have a double cause for celebration today: projected Thai exports have been revised up for the rest of 2010 and ratings agency Moody’s has removed its negative outlook on the country’s Baa1 credit rating.

Today’s inflation report from the Bank of Thailand suggests an enviable track record, with “strong growth” in the second quarter “mainly driven by merchandise exports and private spending”. Thailand is not impervious to the global economy, however: the Bank speaks of weakening external demand and forecasts exports to fall back to trend in 2011. Read more

Ratings agency Standard & Poors has upgraded Argentina to B, the same level as Fitch and now one above Moody’s. The move follows hot on the heels of an upgrade from Fitch.

The sovereign credit rating is still well in junk territory, denoted by the grey shading in the chart, right. The highlighted green line is S&P’s historical rating for Argentina; red is Fitch and blue Moody’s. Click on the graphic to explore the full graphic, in which you can compare countries side by side.

S&P joins Fitch in placing Ireland on a sovereign rating of AA- today; Moody’s rating remains a notch higher at AA. Ireland keeps its second position in the PIIGS’ line-up, however, which runs broadly: Spain, Ireland, Italy, Portugal and then Greece. Play with the graphic below for more.

The current debt trajectory of the US may imperil the country’s future Aaa rating, Moody’s has said.

Steven Hess, senior credit officer at the ratings agency, told Bloomberg the US needed a strategy to tackle its deficit: “Having a clear plan certainly increases confidence and the U.S. doesn’t have that yet… the debt trajectory as it is now is something that might potentially cause us to consider whether the US is Aaa at some point in the future.” Read more

Not one eurozone country deserved a credit rating upgrade in the past quarter, while some, such as Spain, deserved six-notch downgrades, new data show. Indeed, 13 of the worst-performing 15 countries were European (see Q-o-Q change column; source: CMA data).

The UK, by contrast, did deserve a one-notch upgrade. (The bad news is that even an upgrade leaves the UK’s implied rating one notch below its actual rating of AAA.) Far greater winners were Guatemala, Uruguay, Egypt, Bahrain and Colombia, which all merited multi-notch upgrades. Read more

“In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate,” reads p822 of Dodd’s bill. “The activities of credit rating agencies are fundamentally commercial in character and should be subject to the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers.”

Well, Mr Dodd’s wish might just have come true. The WSJ is reporting agreement between the House and Senate:-

A panel of Senate and House lawmakers negotiating final details of a financial-overhaul bill agreed this week to

Lorenzo Bini Smaghi, European Central Bank executive board member, has offered another reason why fiscal retrenchment need not spell recession. This has obviously become an important theme for the ECB, with the US increasing the pressure for European policy steps that promote growth.

Speaking in Brussels, Mr Bini Smaghi pointed out the role of financial markets is often overlooked when future scenarios are modelled. “An unsustainable fiscal policy will, sooner or later, receive the attention of financial markets; they tend to react abruptly, generating a crisis which impacts heavily on the economy.”

He went on: “A timely fiscal adjustment which puts debt dynamics back onto a sustainable path entails a stronger growth over time. Read more

The European Central Bank is keen to reduce its reliance on ratings agencies, Jürgen Stark, a member of its executive board member, told a Reuters conference this morning. Standard & Poor’s, Fitch and Moody’s “follow the market, they act in a pro-cyclical way and that is not helpful,” he said. Already, the ECB had decided to ignore ratings agencies’ views on Greece because it better understood the rescue plans now being implemented.

His comments were the latest hint that the ECB will look for other ways of judging the creditworthiness of assets put up as collateral in its liquidity-providing operations. Read more

How many ratings issuers should we have before some independent benchmark—i.e. a rating—would be needed to discriminate between them?

PwC has announced it is considering a move into the ratings arena, hitherto monopolised—or at least oligopolised—by three major ratings agencies. Perhaps they could start by backtesting the debt ratings issued by these three major players, and comparing them to real events.

2:05 pm: It’s over. After a discussion about rating state and municipal securities (Buffett wit #68 “If the federal government will step in to protect the security, I’d rate it triple A, if not, I don’t know what it should be rated.”) the meeting wraps up. The third hearing will begin at 2:30. No live blog for the next session, alas, but you can watch it here. Read more

Ewald Nowotny yesterday described as “unacceptable” the power of Moody’s to determine the fate of Greece, and possibly Europe with it. Moody’s has just replied – by denying it holds such power.

The ECB usually requires more than A- rating on financial products used as collateral. This was lowered temporarily to BBB- during the crisis, a reduction expiring at the end of this year. Standard and Poor’s and Fitch have since downgraded Greek sovereign debt to BBB+, meaning they would not qualify as ECB collateral when the rating requirement changes back. Only Moody’s has kept a rating that would allow Greek debt to qualify. Read more

The current situation, where Greece’s fate depends on the decision of a single credit rating agency, is not acceptable, European Central Bank Governing Council member Ewald Nowotny said on Tuesday. Read more

Moody’s has raised Oman’s local and foreign currency government bond ratings to A1 from A2. The country ceiling for foreign currency bank deposits has also been lifted to A1 from A2 and the country ceiling for foreign currency bonds has been raised to Aa2 from Aa3. Oman’s local currency country ceilings remain at Aa2. The outlook on the ratings is stable.

“The main driver of today’s rating change is the comparative strength of Oman’s public finances within its rating peer group,” explained Tristan Cooper, a senior credit officer in Moody’s sovereign risk group. Read more

Latvia’s outlook has been raised to stable from negative by ratings agency Standard & Poors, just a day after the outlook on neighbour Estonia was similarly raised.

The reason – as for Estonia – is “successful fiscal consolidation”. Rating were affirmed – B for short- and BB for long-term debt. (This is below Estonia’s short- and long-term rating of A-.) Read more

Local governments are almost certainly paying a premium when they raise debt by themselves – which they are doing in large and increasing volumes. Last year, Europe’s regional governmental (‘sub-sovereign’) debt stood at more than €1,200bn.

Particularly stung are Russia and France, which comprise between them the entire top 20 worst affected sub-sovereign debt holders. By contrast, two Spanish communities actually benefit – with better sovereign ratings than central government. Perhaps the Spanish government should be borrowing from them. Read more

Standard and Poors have raised the outlook for the Lithuanian Republic from negative to stable, and affirmed the country’s BBB long-term rating and A-3 short-term rating. The ratings agency praised Lithuania’s fiscal consolidation, saying: “The outlook revision reflects the government’s successful and still ongoing implementation of substantial budgetary consolidation in the face of a severe external shock.”

The Money Supply team

Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Claire Jones is the FT's Eurozone economy correspondent, based in Frankfurt. Prior to this, she was an economics reporter in London. Before joining the Financial Times, she was the editor of the Central Banking journal. Claire studied philosophy and economics at the London School of Economics. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Sarah O’Connor is the FT’s economics correspondent in London. Before that, she was a Lex writer, covered the US economy from Washington and the Icelandic banking collapse from Reykjavik. Sarah studied Social and Political Sciences at Cambridge University and joined the FT in 2007. RSS

Ferdinando Giugliano is the FT's global economy news editor, based in London. Ferdinando holds a doctorate in economics from Oxford University, where he was also a lecturer, and has worked as a consultant for the Bank of Italy, the Economist Intelligence Unit and Oxera. He joined the FT in 2011 as a leader writer. RSS

Emily Cadman is an economics reporter at the FT, based in London. Prior to this, she worked as a data journalist and was head of interactive news at the Financial Times. She joined the FT in 2010, after working as a web editor at a variety of news organisations.
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Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS

Ben McLannahan covers markets and economics for the FT from Tokyo, and before that he wrote Lex notes from London and Hong Kong. He studied English at Cambridge University and joined the FT in 2007, after stints at the Economist Group and Institutional Investor. RSS